Introduction.
Ethereum Blockchain, the 2nd most popular Blockchain, was developed by Vitalik Buterin and His team to address some of the significant problems that first-generation Blockchain had. They built a complete ecosystem for the developers to deploy and develop Decentralised Applications using smart contracts. Smart contracts are programmable contracts containing business logic conditions that perform some action when someone triggers any function. Soon, After the launch and community feedback, they Introduced various new concepts, out of which Token Development was one.
What is Ethereum Token Development?
Ethereum token Development is a popular development opportunity that connects the whole network with numerous Ethereum-based projects. Ethereum Based tokens represent a value, And most blockchain companies use token concepts as a native currency to interact with the ecosystem.
Now, Since Ethereum Supports token Development, there are some standards set. Every token created on the Ethereum Blockchain needs to ensure that they follow a particular pattern and maintain consistency with other tokens on the network. Hence there was the birth of a new standard called the ERC standard. ERC standard allows Ethereum Based Application Developers to build certain types of tokens like Fungible and Non Fungible.
Such tokens are not composable like Defi Exchanges or Wallets. Therefore it is quite essential to follow basic guidelines for building tokens. In the different sections, we will discuss some of the commonly used ERC standards and understand how they work.
What is ERC In Ethereum Ecosystem?
ERC stands for Ethereum Request for Comments. It is a technical documentation of the definitions of different innovations, research, behaviors, and methods developers and users need to know to build applications on Ethereum.
More simply, understand ERC as an engineering task to write a complete document about the rules and details that a developer needs to follow to develop a certain kind of smart contract.
Evolution of Ethereum token Standards or ERCs
Since the launch of Ethereum, the Ethereum community has continued to introduce different ERC20 token standards to enhance the developer Experience and the user experience, offering various use cases. From the ERC20 token to ERC721A, the Ethereum community has seen success in making blockchain more used technology than before and proving that it won’t be obsolete.
If we look at the timeline, The following tokens have launched in the recent few years
Different ERC token Standards
As we discussed, ERC explains certain rules for different types of tokens Built on Ethereum Blockchain. All the rules, once proposed, are reviewed by the Ethereum Community and approved based on the innovation. Moreover, Any Developer can use ERC to build tokens seamlessly.
ERC20, ERC721, ERC1155, and ERC721A are the four major ERCs popular in the Ethereum Ecosystem and utilized. The Ethereum community has approved only these standards. Before we get into details of every type, one should know some essential points.
- Smart contract developers need to follow specific rules defined by the Ethereum Network to comply with the development standards.
- All the standards are mostly applicable to all EVM-based Blockchains.
- Smart contract standards contain various library formats and themes, token standards, and important information.
Let’s discuss each standard in detail.
ERC-20 Standard or Fungible tokens.
While Ethereum was under Development in 2015, this token standard was proposed and fully integrated in 2017. ERC-20 standard was introduced to build fungible tokens on Ethereum Blockchain. One common property of the ERC20 token is that all the tokens are identical.
ERC20 tokens are useful to represent a native currency or any other currency on Ethereum. And one token will always be equal to the other token. An ERC20 token has numerous use cases like the following.
- Fiat Currencies Representation.
- Financial Assets such as a stock of the company, dividends, shares
- Lottery tickets
- Loyalty points or Reputation points.
Ethereum needs a robust standard that brings uniformity across the network and the development process. These ERC20 tokens are quite important. Some of the important Characteristics of ERC20 tokens are following.
- ERC 20 tokens are often known as the Fungible tokens.
- Fungibility means that any asset or token can be exchanged for tokens of the same value as fiat currency, such as the dollar. One dollar note equals another 1 dollar note, and 1 dollar can be split into 0.5 USD.
- Each ERC20 token has the same value despite different features or structures.
- ERC20 tokens can be used to develop governance tokens, ICOs and Stablecoins
ERC721 Standard or the NFTs
NFTs are the buzzword nowadays. Most of you would know about this standard. NFT or the ERC721 standard tokens represent ownership of any real-world asset such as artwork or music. It was first invented by the CTO of CryptoKitties, Dieter Shirley, who initiated the new proposal of building ERC721. Some of the use cases of ERC721 tokens are
- Representation of artwork
- Ingame collectibles
- Gaming characters
- Any cartoon character
- A unique digital art or music
Characteristics of ERC721 Tokens are —
- ERC721 tokens are non-fungible tokens.
- Every token is of a different kind; moreover, there can be two similar NFTs.
- Every ERC721 token has a different value based on what it represents.
- There are a lot of applications of NFT tokens in Industries like Education and Creative Industries.
ERC 1155 or Multitoken Standard
Multiokens mean combining the characteristics of both ERC20 and ERC721 tokens. Radomski, CTO of Enjins, introduced it. It is a standard protocol to build a combination of fungible, nonfungible, semi fungible tokens through a smart contract.
ERC1155 has been quite revolutionary as it improvises the complete functionality of ERC20 and ERC721 by making the Ethereum Ecosystem more stable and enhanced.
Characteristics of ERC1155 tokens are
- ERC1155 is useful for building NFTs, shopping vouchers, and conducting ICOs.
- Every token has a different value based on what standard it follows. Three main types of tokens built with the ERC1155 standard are fungible, Non Fungible, and semi-fungible tokens.
- It represents all kinds of tokens.
ERC 721A standard
ERC 721A is an improvement standard for ERC721 tokens. It was proposed by the Azuki team and used for developing their NFT collection. Compared with ERC721, ERC721A is a more gas-efficient standard to mint thousands of NFTs simultaneously. It allows developers to mint multiple NFTs at the same gas price. This has been a great improvement due to Ethereum’s sky-rocketing gas fee.
Any project or product looking to mint thousands of NFTs simultaneously should use this standard. Some of the projects using ERC721A are BEANZ and Azuki.
Conclusion
New inventions are always happening in the Ethereum ecosystem that unleashes various new concepts and token standards to cope with the changes happening in the blockchain world. With the introduction of ERC token standards, many businesses and enterprises could conduct ICOs for their project, build a native currency system, and represent their unique creative skills through the ERC721 token.
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